Why I Never Use Net Income
“I think that every time you see the term EBITDA, you should substitute the word ‘bullshit earnings’.” Charlie Munger on Net Income – AKA EBITDA
In my network of friends / family / colleagues, I’m most often known as ‘The Investment Guy’.
Because of this, I’m often asked about the latest trend in investing, whether it be years ago, gold and silver, the Greek Crash a couple years ago, or more recently, weed stocks and cryptocurrency.
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Today, I tell you why I NEVER use net income – AKA EBITDA, AKA earnings.
Let’s get to it…
In the 16-minute video above, I tell you why I never use net income.
Here are some of the things I talked about in the video above:
- Why net income sucks
- Why I and many other investors consider net income as ‘bullshit earnings’
- Why it’s easy to manipulate. Meaning companies can make this number anything they want, meaning it’s not reliable
- Why I’d rather know the operating profits of a company
- Or its free cash flow production
- Or its owner’s earnings instead of net income
- And more…
Do you use net income? Did I miss something? Let me know in the comments below.
Click the link below to check out my article that further explains some of these concepts Why The P/E Is Useless And How To Calculate EV below.
Here’s an updated talk on this from our Value Investing In Your Car series.
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EBITDA is not the same as net income….
EBITDA is not the same as net income…
I know they aren’t technically the same thing…
But almost everytime I’ve ever seen EBITDA and net income in the same sentence its been used interchangeably.
The only time I’ve not seen that is when its used as adjusted EBITDA.
Either way – EBITDA, net income, adjusted EBITDA – still all bull shit earnings in my opinion 😉 because of how easily they can and are manipulated.
Thanks for the comment and reading here.